Maine Voters Reject Tax Reform Initiative, But Approve Infrastructure Investment

On June 8, 2010, Maine voters considered legislation, which would have reformed the state’s tax structure and bond measures that will bolster infrastructure investment. By a large margin, Mainers rejected a law passed last June, LD 1495, to lower the top income tax rate from 8.5 percent to 6.5 percent for state residents earning less than $250,000 annually by broadening the sales tax to include different services and shifting tax burden to nonresidents by increasing the meals and lodging tax from 7 to 8.5 percent.

Supporters of the reform initiative, most notably, Maine AFL-CIO, some regional Chambers of Commerce, the Maine Council of Churches, and the Maine Center for Economic Policy Institute (MECEP), contended that it represented the most substantial reform of the state’s tax code in almost four decades. Overall, MECEP found that the “modestly…progressive” package would have provided “direct help for families struggling to survive in this troubling economic climate, and it is money that will stay in the local and state economies and buoy Maine small businesses.”

Opponents, including conservative groups, the state’s Realty Association, and businesses tied to the tourism industry, who argued against shifting some of the state’s tax burden to tourists and expanding the sales tax base to include different categories of services, gathered the necessary signatures to place the issue up for referendum as Question 1.

While the legislation would have reduced the income tax burden for 95 percent of Maine families and made it easier to apply and receive property tax relief through the state’s circuit breaker program, advocates believe the campaign to support reform faltered due to the complexity of the message.  While many voters readily saw expanding the sales tax base to services as a tax increase, they were skeptical that the state would deliver on lowering the income tax burden.  Sen. Joe Perry, one of the authors of the legislation, reflected on the results, “I never thought I’d see the public vote to raise their own taxes.”

The ballot defeat additionally indicates that while the current sales tax in most states is outdated and designed for an industrial economy in which most consumer-spending went to buying goods, expanding the sales tax to services is still a challenging message to articulate to voters.

Although Mainers rejected changes to the state’s tax structure, voters made clear that they support spending for long-term investments to spur economic development by approving bond measures for “$26.5 million for an offshore wind energy demonstration site, related manufacturing and campus energy conservation; $47.8 million for highways, railroads and marine facilities; and $10.25 million for clean water projects.”

Source: Progressive States Network

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